Pakistan rejects IMF’s electricity tariff hike demand

ISLAMABAD: Pakistan turned down the International Monetary Fund’s (IMF) demand to raise electricity tariffs, energy minister said on Tuesday, as a delegation of the Washington-based lender concluded its two-week visit to the country pushing ahead the bailout decision.

Minister for Energy (Power Division) Omar Ayub said the government is not ready to further increase electricity tariffs, which have already been increased.

Ayub was talking to media on the sidelines of a workshop on renewable energy policy.

Energy minister said the National Electric Power Regulatory Authority (Nepra) proposed Rs3.28/unit increase in power tariff.

“We have not increased tariff for small commercial consumers and also given relief to the industrial sector,” he added. “We have also reduced tariff for the agriculture tube wells.”

IMF’s delegation left Pakistan after a two-week visit to discuss a potential bailout package to support the country’s balance of payment position. The lender stressed fiscal discipline and increase in tax and non-tax revenues. Dialogue will continue over the coming weeks.

On K-Electric, the energy minister said it should improve investment in its system upgradation. The National Electric Power Regulatory Authority penalised the electricity firm for not showing good performance, he added.

Ayub, addressing the workshop, said dependence on alternative power sources is increasing due to its low cost.

“Our (industrial) products are unable to compete in the international market due to high cost of energy from other sources.”

Energy minister said the government is formulating energy policy framework and reviewing the current energy demand to make it updated. “Solar and wind sources are the basic preference of the government.”

Participants proposed the government to extend the scope of the existing renewable energy policy 2006 until the new policy is developed. The policy has been successful in attracting investment in renewable energy sector, they said.

The participants said the policy framework should be announced for the longer term without any cut-off date, while impulse policy changes should be avoided.

They also proposed the government to consider off-the-grid population while updating energy demand.

New renewable energy projects should be developed through competitive bidding that should be well-structured to achieve the target of lower competitive tariffs. The benchmark tariffs should be set for competitive bidding.

The participants further advised that grid constraints need to be addressed on priority basis to enable smooth injection of renewable power into the system.

There is a need to augment and revamp old transmission and distribution networks to efficiently evacuate every unit of electricity generated from renewable energy projects.

The frequent tripping in grid network is not associated with intermittent nature of renewable rather it is due to depleting grid network.

The participants said proper grid planning needs to be carried out prior to commissioning of renewable energy project as new grid infrastructure requires two to three years, whereas wind and solar projects can be developed in 12 to 18 months after financial closing.

They suggested the steps and procedures for development of renewable energy projects should be simplified so that gestation period of the projects can be reduced. Timelines for approvals and tariff awards too need to be revisited.

The existing projects that have made significant investment and are at advance stages should be allowed to be complete, they added.

The participants said donor agencies are willing to offer grants for construction of grid network for renewable energy projects. These funds should be availed as they would enable integration of the projects without any burden on government.

The country has one of the lowest per capita annual energy consumption of approximately 400 kilowatt-hour (kWh) per annum compared to global average of 2,600 kWh per capita and 4,400 kWh for China.